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Digital capital is defined in this article as tangible assets, such as servers and online purchasing platforms, that plug into the digital economy, as well as intangible assets, such as Big Data and business analytics, which are the back office of digital operations. The authors suggest that digital capital is strongly tied to a company's economic growth and activity, and they encourage business leaders to create a mindset in which they embrace its importance. They propose three ideas that help companies identify, quantify and protect digital assets.

Related Summaries

Digital capital, in particular intangible assets, are treated as expenses and not company assets according to conventional accounting methods. However, sometimes they should be treated as capital because they can be long-lived, among other reasons, according to this analysis.

A Financial Accounting Foundation team will conduct a post-implementation review on the Governmental Accounting Standards Board's standard for the impairment of capital assets and insurance recoveries. FAF also plans in August to publish a review of two GASB standards for risk financing and insurance-related activities.

The Securities and Exchange Commission's newly formed Financial Reporting and Audit Task Force will be weighing how to use the agency's advanced data-mining capabilities as it steps up its fraud-detection activities. The task force will also model its activities after the SEC's push to detect "aberrational performance" among hedge funds via its Aberrational Performance Inquiry.

Public Company Accounting Oversight Board member Jay Hanson said that estimates and valuations are frequent trouble spots for corporate financial statements and that auditors should adjust their approach accordingly. He noted that financial statements no longer are dominated by tangible assets and historical accounting and thus auditors need to focus on being independent and skeptical.

Some pension funds are using tangible assets to help meet their obligations. The Pension Benefit Guaranty Corp. reports taking control of such assets as water rights and a hog-slaughtering facility. Other examples include cheese and trees. The question is, how do pension funds value such assets correctly? Different state rules also complicate such questions.